Physical Inventory, Definition and Benefits

Physical Inventory, Definition and Benefits

Physical Inventory, Definition and Benefits

One of the routine activities that must be carried out in company activities is Physical Inventory. This activity requires a significant effort for business people especially if they are still working on recording stock-taking manually. For this reason, understanding Physical Inventory, its benefits and processes can make a business run smoothly.

Definition of Physical Inventory

Physical Inventory is the activity of calculating the number of goods or products that accumulate in warehouses or in stores before they are sold to customers.

Physical Inventory can also be interpreted as one of the item monitoring techniques in a company to control the compatibility between the number of physical goods and accounting records or data on a computer.

Also read: Free Stock and Sales Android Application

Because if someone makes a mistake in determining the number of products, it will automatically affect the number of products themselves, mostly when the product will be sold.

The Physical Inventory activity is very time-consuming when it is done manually. Because management or auditor officers must check directly to the warehouse to determine the correct amount of goods.

But for now, this item counting activity is more comfortable. It is primarily supported by sophisticated technology that can help this stock-taking activity, namely using barcodes.

A barcode is a bar diagram with a numeric code indicating the type and price of an item. There are similar items, but there will be a different barcode code for each item.

Barcodes are believed to be comfortable and accurate in helping to reduce errors in recording and calculating goods.

From the surveys and research that have been conducted, it is stated that stock-taking with the barcode system can minimize the occurrence of recording errors, including calculations.

stock count application

Why Do You Have to Do Physical Inventory?

After knowing what is meant by Physical Inventory, the next question is, why is this activity only suitable when checking the availability of goods?

The Physical Inventory activity is carried out to determine precisely and correctly the inventory of goods in the bookkeeping records and interests in the warehouse.

The calculation of the number of items in the warehouse serves to find the truth and accuracy of the company’s bookkeeping records regarding the number of items. By ensuring the number of items in the warehouse, management can perform calculations accurately and determine how many things need to be produced to meet market demand.

If more items are found than are written in the stock-taking, then double-check if there is a possibility of transactions that have not been recorded or errors in recording.

stock taking

What are the benefits of Physical Inventory?

Apart from recording the stock of goods in the warehouse, it turns out that stock-taking has other benefits, which are as follows:

  • Can know the stock of goods in the warehouse, whether in accordance with the accounting records reported.
  • Can follow up immediately if any items are missing or damaged so that there are no vacancies.
  • As a comparison of last year’s stock of goods or data from similar companies so that it can analyze the progress of the company
  • Can know the inflow and outflow.
  • Can know the condition of stock in the warehouse or in the store with accuracy.
  • With the accuracy of inventory data, companies can also monitor the availability of goods in the warehouse, any items that move quickly, so there is no accumulation of goods, known as dead stock.

Activity Objectives Physical Inventory

After knowing the meaning of Physical Inventory and its benefits, the next question, what is the purpose of Physical Inventory?

The purpose of Physical Inventory is to know precisely and accurately about the inventory of goods in the books and those in the warehouse with the same amount or even if there is a difference in fewer goods.

An accurate calculation of the number of items will make it easier to arrange goods in and out of the warehouse. If there is a discrepancy between the record and the number of stock items it means there is a calculation error, then the officer appointed to carry out stock-taking is a special auditor who checks whether there is a possibility of unrecorded transactions or errors in recording.

subsribe youtube Sterling Tulus Cemerlang STEM

When to carry out the Physical Inventory?

In general, Physical Inventory is done at the end of the year or even at the end of each month, depending on company policy. Meanwhile, the optimal period for companies to do Physical Inventory is as follows:

  • Daily Period

    The time to carry out the stock-taking depends on the needs. For companies that do it every day usually have types of products that run out quickly and have low shelf life such as food and beverages

  • Monthly Period

    Usually the time taken is 3 months (quarter), 6 months (semester) or even 12 months (a year). Companies can determine the period of carrying out stock taking according to the level of need and ability to do so.

  • Period based on events or events

    Based on the time required, for example, there is a force majeure that causes stock verification. There are also special events that cause traffic in and out of stock items to be quite high such as holiday promos, Harbolnas and so on.

The Process of Performing Physical Inventory

Here are the steps for Physical Inventory

  1. Check to make sure all goods transactions have been recorded into the system
  2. Print all the stock in the program that will be used as a guide for analysis
  3. Gives printouts to accounting
  4. Stock-taking is done by providing a sticker or some sort of marker on the counted goods
  5. The calculation results are submitted to the digital data input team
  6. Analyze the data in the program (digital) with the results of the stock-taking manual
  7. Give the results of the inspection to the accounting department so that the company’s stock data is synchronized.

If you have reached this stage, the stock counting process for goods in the warehouse using stock-taking has been completed. Next is to find a solution if there is a difference between the number of items in the program and the stock items that are calculated manually.

For your convenience in managing inventory, you can also use the Stock Count application for mobile devices with full inventory features.

understanding of stock taking